Make sure all things are equal in your joint finances

Nyree Stewart

15 June 2018

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Assumptions about men being the main breadwinner in a relationship may be dying out, but the UK still has a long way to go before couples take an equal role in managing their finances and investments. We look at emerging trends and how we can prevent gender stereotypes affecting our finances

The gender pay gap and the resulting drive to put more women in senior positions in the boardrooms of large companies has seen the topic of wealth and gender catapulted into the headlines.

In the 21st century, some may think the traditional stereotype of the man being the main breadwinner in a relationship and looking after the family finances has fallen by the wayside. But research by digital investment service UBS SmartWealth, published in December, suggests that less than a fifth (16%) of women consider themselves to be the breadwinner of the family.

This survey of 2,000 co-habiting couples revealed 59% of men considered themselves to be the main breadwinners, with only 8% identifying their partners as the main contributor to household finances.

One trend that emerged from the survey was that men consistently undervalued the role of their partners when it comes to investing, saving and paying bills. For example, 53% of men say they have most responsibility for saving, with just 9% attributing this role to their female partner. Yet 46% of females felt responsible for savings.

Less than a fifth (16%) of women consider themselves the breadwinner of the familyUBS SmartWealth, January 2018

On bill paying, 55% of men said this was mostly their responsibility compared with 41% of women.

But when it comes to investing, while 33% of women feel they have the more important role in investment decision making, 60% of men believe they have the most responsibility for investing – and just 6% of males felt their partner held this role.

There is a perception that while men are willing to trade the stock market, women are more cautious with their money. The most recent HMRC figures show that in 2015-16, more than 1.1 million investment Isas were held by men, compared with 892,000 by women.

Meanwhile, the UK findings from BlackRock’s 2017 Investor Pulse survey reveal that just 32% of women feel confident when it comes to savings and investments, versus 46% of men, and only 38% of women feel in control of their financial futures, compared to more than half (51%) of men.

“Only 38% of women feel in control of their financial futures”

Helen Morrissey, personal finance specialist at financial provider Royal London, says: “A lack of confidence is often cited as a key barrier to women investing, but there is no need to invest solely in high-risk investments to build a nest egg. A steady return built up over the long term will go a long way towards building a decent pot. Speaking to a financial adviser can be really helpful in finding the right investment strategy to meet your needs.”

She highlights that initiatives such as auto-enrolment have had a huge impact on the number of women saving into a workplace pension, with recent Department for Work and Pensions (DWP) figures suggesting the percentage of women saving into a defined contribution pension has risen from 40% in 2012 to 73% in 2016.

“However, it’s important to realise that current auto-enrolment minimum levels will not provide enough to generate a decent income in retirement. You should look to top up contribution levels wherever possible. It’s also worth bearing in mind that employers also contribute to workplace pensions, so it’s a great way to boost your savings,” she adds.

In 2015/16 1.1 million investment Isas were held by men, compared to 892,000 by womenHMRC, April 2018

Attitudes towards gender and finance are changing

The UBS research also indicates that generational attitudes towards gender roles are beginning to change. For example, in couples aged over 45, 65% of men claimed themselves to be the main breadwinner, compared to 13% of women. But in couples aged under 35, the figures are lower for men, at 42%, and almost double for women, at 23%.

Jane Goodland, responsible business director at Quilter, adds that while in the past financial decisions may have been made by just one family member, typically a male, “that perception is outdated”.

“The cliché that women are more cautious investors than men crops up time and again”

She explains: “Our research [‘In-Betweeners, A Generation Between Pension Regimes’] shows that 40% of women aged 30 to 45 are the primary decision-makers when it comes to the household finances.”

She also points to research and insight firm Kantar’s ‘Winning Over Women’ report last year, which highlighted that women have a different focus when it comes to dealing with their finances.

“They are more concerned about relationships and family members, whereas men are focused on products and price. This means that women are looking for a fundamentally different conversation about their finances,” Ms Goodland adds.

“According to some estimates from the Boston Consulting Group, by 2020, 66% of the world’s wealth will be in the hands of women. To prepare for this, financial services firms need to innovate to make sure they are ready to meet the financial goals and attitudes of females.”

How to break down gender barriers in finance

In the wake of equality initiatives around the world, what can be done to speed up the process of removing these financial stereotypes?

Ms Morrissey says the most important thing to remember is to not be over-reliant on a partner or the prospect of being part of a couple to secure your financial future.

She says: “If you are in a couple, you should make sure you have a good understanding of each other’s finances. In a relationship, one partner should not have full control of the finances. Do you know what bills are coming in? Do you know what debts your partner has? Differing financial outlooks can cause real tension within relationships. Do you understand your partner’s approach to managing money, as hidden debts could impact your own credit rating as well as that of your partner. Sitting down as a couple and working out a budget you can both stick to can save a lot of arguments.”

40% of women aged 30 to 45 are the primary decision-makers when it comes to the household financesQuilter, February 2017

Sophie Kilvert, relationship manager at Seven Investment Management (7IM), points out that often women only start to take control of their finances after a life-changing event.

“There is always a risk of falling into gender stereotypes when discussing finances and gender – the cliché that women tend to be more cautious investors than men is one that crops up time and again, but the picture is far more nuanced and I know many women who would actively bristle at the suggestion.

“I am proud to have as many female clients as male, but it is also fair to say I have more single women than I do single men. I find women tend to be more likely to seek advice after a significant life event such as bereavement or divorce, often having not been in the driving seat managing the finances historically. Being in the dark financially can make difficult periods in your life very much worse – the last thing anyone needs at a vulnerable time is a financial shock or a feeling of not being in financial control. Whether you are male or female, couples should think about managing their finances as a team.”

Ms Morrissey notes that having all the bills in one partner’s name can affect the other partner’s credit rating. “This is particularly important if you have never had a loan or credit card before – a lack of information means it can be hard for credit reference agencies to build a file on you, which means you may struggle to get credit in the future. Having some utility bills in your name will enable these agencies to build a credit file on you.”

She adds: “Wherever possible, make your own provision, whether that is pensions, Isas or other savings vehicles. Your partner may earn more than you or have a better pension, but you need to think about the position if that relationship were to end. While married couples would obtain some kind of financial settlement as part of a divorce, what about those couples who cohabit? There is no concept of ‘common law marriage’ for couples who have lived together for a long time and if a relationship were to end one partner could be left with very little financially.”

“Some women fail to consider their financial needs”

Of course, many women may not find it easy to take control of saving and investing, especially when they earn less than their male counterparts. Last year, the government introduced mandatory reporting of the gender pay gap by companies with more than 250 employees. Of the 10,281 companies that reported data for the 2017/18 year, over 880 reported no gender pay gap at all based on median hourly earnings, but 147 companies reported a gap of 50% or higher.

Emma-Lou Montgomery, associate director at Fidelity Personal Investing, says: “To paraphrase [singer/songwriter] Tammy Wynette, sometimes it’s hard to be a woman. From getting paid less than our male counterparts to taking career breaks to have children, women’s working lives very often stumble before they’ve even started.

“We might live longer, but we’re massively unprepared for it financially. Lower earnings for working mothers and part-time roles can be to blame, but so can simply failing to consider your own needs. While your children may well be your priority, remember you’re important too. Putting at least something aside for your future financial security isn’t selfish – it’s essential.”

Claire Walsh, a chartered financial planner at Aspect 8, summarises: “Unfortunately, in mixed-gender relationships the stereotype of the man being in charge of personal finances often still bears out. While many women manage the day-to-day finances, it does tend to be men who make the longer-term financial planning decisions, particularly when it comes to mortgages, investments and pensions.

“It is natural in a couple to have a division of labour, but understanding your personal finances and taking control of these is so important to long-term financial security and peace of mind. I think we are seeing a change in younger demographics, but more needs to be done to encourage women to take more interest in their finances.”

Median income before tax by age and gender 2015-16

Age

Males

Females

Under 20

13,800

13,400

20-24

17,300

15,900

25-29

22,300

20,500

30-34

26,700

23,000

35-39

30,000

24,200

40-44

32,100

23,900

45-49

32,200

23,100

50-54

31,800

22,400

55-59

30,800

21,900

60-64

27,200

20,100

65-69

22,900

17,800

70-74

19,500

16,900

75 and over

19,000

16,000

Source: HMRC - Personal Incomes Statistics 2015-16

NYREE STEWART is a freelance personal finance journalist who writes for the Financial Times and Money Observer